Environmental Sustainability Practices and Financial Performance of Listed Commercial Banks in Africa
DOI:
https://doi.org/10.53819/81018102t7051Abstract
Since the 2008 global financial crisis, the financial performance of banks has been cyclic and unstable, largely due to poor monetary policies and inadequate regulation. The increasing push from legal, regulatory, and public advocacy forces for banks to adopt environmental, social, and governance (ESG) policies has also significantly impacted operational costs. However, there is a scarcity of comprehensive studies on how environmental practices affect the financial performance of banks in Kenya and Africa, using globally recognized environmental metrics. This study aimed to explore this relationship for listed banks in Africa. This study aimed to examine the relationship between environmental practices and the financial performance of listed banks based in Africa. This study adopted the positivism philosophy and the explanatory non-experimental research design. The study was anchored on shareholders’ value theory, stakeholders’ theory, signaling theory and the legitimacy theory. The target population was all the listed banks in Africa, while the sample which was selected through purposive sampling, comprised the fifteen listed banks in Africa which had environmental scores in the London Stock Exchange Group (LSEG) database and which had consistently reported on financial performance over the study period, from 2013 to 2022. The study used secondary data on environmental sustainability scores and financial performance which were obtained from the London Stock Exchange Group. Data analysis included descriptive and inferential statistics, with panel multiple regressions to account for time and cross-sectional dimensions. Financial performance was proxied by return on assets (ROA). The regression results established that environmental practices had a moderate positive impact on financial performance. In addition, the study established that adoption of environmental sustainability initiatives by banks in Africa was at a moderate level. The study recommends that commercial banks in Africa prioritize the implementation of environmental sustainability initiatives to optimize financial performance, although the financial benefits may not be immediate. The study contributes to the existing body of knowledge by offering a comprehensive examination of the relationship between environmental sustainability practices and financial performance within the specific context of commercial banks operating in Africa.
Keywords: Environmental Practices, Financial Performance, Green Banking, London Stock Exchange Group, Sustainability.
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